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					THEORY IN PRACTICE
    Home Depot




       Bus 444
   Professor Meilich
     Sean Culhane
Introduction:
        I chose Home Depot as my Theory In Practice Company. They are listed on the NYSE
under HD. I am looking at this company because I used to work there, my brother-in-law still
works there, and because there would be enough public information on the web to complete this
assignment.
        The Home Depot was found in 1978, in Atlanta Georgia. At the end of 2003, they had
over 1700 stores in the U.S., the District of Columbia, Canada, Mexico, Puerto Rico, and China.
They are currently rated the world’s largest home improvement store. Home Depot employs over
300,000 people and in 2003 they posted net sales of 64.8 billion dollars. The Home Depot offers
everything imaginable for the do-it-yourself customers, to the everyday construction personnel
and even a little something for the upper class customers who can shop their Expo stores.
(http://www.homedot.com/)
        The Home Depot is relevant to this course for many reasons. As a business, Home Depot
couldn’t have been as successful as it is without a lot of well-planned strategies. They have a
different way of treating their customers and their employees. When you work there, you can
feel the team atmosphere and when you shop there, you can find yourself thinking, “It sure
would be fun to work here.” A company can’t pass on this feeling with luck. I strongly believe
there will be a lot of relevant information from our class material that will agree with the Home
Depot’s management philosophy.


Ch. 1 Strategic Management Process
        The Home Depot builds the foundation of its business on its employees and its eight
value statements. These value statements include taking care of our people (associates), giving
back to their communities, doing the right thing, excellent customer service, creating shareholder
value, building strong relationships, entrepreneurial spirit, and respect for all people. (“home
depot values” n.d.) These are the guiding principles for every employee of the Home Depot
team.
        It would be easy for me to say that Home Depot is the most profitable home improvement
store in the United States and their strategy must be working, but that wouldn’t be very
acceptable. With that, let’s take a closer look at what strategies they are using to stay
competitive.



                                                  2
       The Home Depot has managed to hold onto their competitive advantage even though
Lowe’s has taken a strong second place. Their primary focus in doing this is through relationship
building. Home Depot really believes in teamwork and treating their employees, suppliers,
customers, and community members like family. It is because of this aspect that Home Depot
can have a longer employee retention rate, have a very personal relationship with their main
suppliers, and have a large customer base. When I worked at Home Depot, many of the
customers would go out of their way to shop only at Home Depot. As an employee, you
established a relationship on a personal basis and really got to know the frequent customers. It
was promoted within Home Depot to build these types of relationships.
       The founders of Home Depot, Bernie Marcus and Arthur Blank, started in this business
with a simple plan. They were going to open a warehouse filled with products from the floor to
the ceiling, train associates, and provide the best customer service in the industry. Within the first
five years they had stores in over six states. Considering their overall success, I would agree their
strategic management process is working. Each store has a weekly meeting with the store
managers to discuss upcoming events. Every month, the district managers get together with the
store managers and they do a miniature store comparison (industry analysis) to see where they
stand against their competition. This information gets past down to the associate level at the
monthly in store meetings. At the end of the fiscal year, the corporate managers send out
information that details where the company is going. The Home Depot spends a lot of time
analyzing where they stand in the industry. This allows the management staff to quickly change
their position to maintain their strategic position.


CH. 2 External Analysis
Let’s take a look at Porters five forces.
Industry Definition:
       We will be looking at the large retail chain of home improvement stores. Our focus will
be on the retail chains, but our primary focus will be on Home Depot and their main competitor,
Lowe’s. They provide a number of products that supplement the home building and home
improvement market.




                                                   3
      Product Value Chain:
                                      Raw
           Concrete                  Materials               Metal




               Wood               Manufacturer
                                       s



                                  Retail Chains                      Final
                                                                   Consumer



      Scope:


                                                              Dixieline,
                                                  Home        Homebase,
Garden shops, Equipment rental                                Ace Hardware,
stores, Plumbing shops, Lumber                    Depot,
                                                  Lowe’s      Specialty
supplies, Tool shops




      Strategic Group Map:




 Specialized
                                 Home Depot
  services
                                   Lowe’s




Standardized                                               Smaller retail
   services                                                  chains




                                    Complete                   Few
                                   product line              products
                                                      4
Barriers to Entry: High
         The home improvement industry is very challenging to get into because of the capital
requirements, the controls on distributions channels, and the favorable locations are already
taken. The established companies are completely taking over the industry and shutting down
anyone who tries to get in their way. Anyone trying to get in must have a lot of money and have
established relationships with good suppliers.


Intensity of Rivalry: High
         Home Depot and Lowe’s are literally trying to cut each other’s throats. Lowe’s has a
prominent position on the east coast and Home Depot is larger on the west coast so their size and
power are becoming equal. The storage costs are high because of the amount of product they
have in stock. Product differentiation is very low. Switching costs are low except for the die-hard
customers.


Power of Buyers: Low to High
         This category really depends on what buyers we are looking at. If we say contractors,
then their power is high because of the volume of purchase and the total buyer’s costs spent on
the industry. If we look at the individual customer like you and me, our power is low because we
just don’t use a lot of our expendable income on home improvement projects. We may spend a
lot of money all at once on a single home project, but overall we just don’t have that much
power.


Power of Suppliers: Low
         There are a lot of suppliers in this industry supplying all kinds of materials. Home Depot
really establishes a special relationship with their main suppliers. I would say it’s a balance of
power just because of the relationship. They rely on each other for their individual success.
Overall, Home Depot has the upper hand because it wouldn’t cost anything to switch suppliers.
Unfortunately, the suppliers may have a problem being picked up by another large home
improvement store because the market is so saturated with products.




                                                  5
Power of Substitutes: Low
       There are a few substitutes left in the industry, but for the most part they have been ran
out by the bigger chain stores. The mom and pop stores are becoming an item of the past and the
industry is becoming consolidated in that a few large companies are controlling it.
       The home improvement industry is a tough industry to get into and stay competitive.
With the barriers to entry and the intensity of rivalry so high, companies are unable to compete
with the established home improvement stores. Home Depot and Lowe’s are quick to adapt
themselves to customer’s demands and the environments changes.
       In looking at the industry life cycle model, I would have to say the home improvement
industry is in between the growth stage and the industry shakeout stage. The demand for housing
is up and people are always improving their homes. The larger stores, because of price
differences, are pushing out the smaller home improvement stores causing the industry to
experience somewhat of a shakeout. The development of new products has helped in keeping
this industry competitive.


Ch. 3 Internal Analysis
       The building blocks of a competitive advantage are efficiency, quality, innovation, and
responsiveness to customers. The Home Depot hiring process is not any different than your
typical application process. You sit down, fill out an application, and if you are lucky you get
called in for an oral interview. It is at this point you begin to feel what this company is all about.
Home Depot strives to hire professionals that can better serve the typical do-it-yourself customer.
In return, they pay very well and the benefits are outstanding. It is not uncommon to find a sales
associate making around $20/hour. Profit sharing plans, merit awards for excellent customer
service, and in house promotions are just a few of the benefits offered to associates. My point is
that Home Depot takes care of their employees. In turn, this makes the associate want to take
care of the customer. This results in employees being more efficient because they work for an
employer that really cares about them and it also makes for a better experience for the customer.
       More than a half of a million kids built their first toolbox at the Home Depot Kids
Workshop. (www.homedepot.com) The kid’s workshops allow parents to bring their kids down
and actually work to build different items. It shows Home Depot’s support for families and for
the community in general. They also offer do-it-yourself clinics for adults on flooring, painting,



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gardening, and just about any other home improvement topic you can think of. There is no other
home improvement company spending the time or resources on responsiveness to customers than
Home Depot. They truly offer an individual experience for their customers.
       The ability to avoid failure is wrapped up into three ideas. They are inertia, prior strategic
commitments, and the Icarus Paradox. Home Depot’s constant change of strategies and
management plans in their monthly meetings shows they don’t have a problem with inertia.
Their constant analysis of their competitor’s position and their adaptation to Lowe’s moving in
on their customers is also an example of their ability to change their strategic commitments.
       Home Depot started out as a warehouse store but has moved into other markets with the
Home Depot Expo stores. These stores are for the customer who wants to see a finished product
of a professionally designed room. They are for customers who like custom installs and want
something unique. The Home Depot also acquired a lighting store and a custom floor design
store. These are just a few examples of how Home Depot has kept up with the customers needs
and planned for their future success. They have not just sat back and soaked in their success.
They have realized that their stores need to be updated and their internal environment always
needs to change.


Ch. 5 Building Competitive Advantage Through Business Level Strategy
       Home Depot’s business level strategy at its warehouse stores is cost leadership. Home
Depot tries everything it can to lower its costs and provide lower prices for their customers.
Everything involved in opening a store, hiring employees, picking its suppliers, and choosing
store hours is revolved around lowering costs.
       Home Depot has a consultant group they send out when they are considering opening a
store. Like any store, a team will go out and survey a few different areas Home Depot is planning
on moving into. They look at the resources in the area, the customer base, the employee base,
and overall profitability of moving into the different areas. Once the most profitable location is
selected, Home Depot begins the building process.
       In hiring employees, Home Depot really looks for the people that are going to be able to
fit within the established culture of Home Depot. It is not abnormal to find many professionals
throughout the store. People working in the paint department were most likely professional
painters at some point of their career. Home Depot is able to lower their prices here because they



                                                 7
hire qualified people that know a lot about the department they work in. This turns into less
money spent on training and better assistance for their customers.
       The third major item is picking its suppliers. Home Depot doesn’t save money by picking
the cheapest supplier that comes along. They build relationships with their supplier, which in
turn makes the supplier stick with Home Depot. In the end the consumer receives lower prices
because they don’t have to bounce back and forth between suppliers.
       The last item is choosing store hours. Depending on customer demand in the individual
communities, Home Depot has different store hours. They don’t work on a policy of 8 to 5
Monday through Friday. They let the customers decide their store hours. This does more for
building a relationship with the customer and offering something their competitors don’t. It also
lowers costs because stores that are slower are open fewer hours.
       Home Depot also offers a price guarantee, but it is the industry average of 10% below
their competitor’s price. A very interesting fact is that Home Depot has never had a sale on any
of its products. The manufacturer will offer rebates at times but Home Depot has never offered
an in store sale. They do not believe in yo-yo prices of the typical company in most industries.
The employees only receive a discount at Christmas time. There is one-day set aside where a
purchase can be marked down by 10% for employees. This just feeds back into Home Depot’s
policy of being the low cost leader.
       In looking at the Home Depot Expo stores, I would say they are a mixture of cost
leadership and differentiation. They still have the same low prices as the warehouse stores but
they offer custom products. They also contract out to an installation crew that goes to the
customer’s house and installs anything they order. This is differentiation because they are
striving to offer specialized services to customers. Instead of the customer buying the products at
one store and then trying to find an installation crew. The customer can have all their needs met
at one store. This is something other stores in the industry are offering but not with the
customization that Home Depot has. Home Depot is able to specialize because they own their
own custom flooring and lighting company.


Ch. 6 Competitive Strategy and the Industry Environment
       Home Depot is a heavily chained company. It’s challenging, at least in Southern
California, to drive 10 miles down the freeway and not see a Home Depot. Home Depot receives



                                                  8
four major benefits in being a chained industry. Their inventory system, their store layouts, in
store training, and their advertising are all remotely the same no matter where you go. Their
inventory system is interconnected with all of the stores. With some exceptions, a computer
realizes when new inventory is needed in a store and an order is put in with the suppliers. The
stores are mapped out into sections so one supplier may be able to send one truck to ten different
Home Depot’s. The second area they benefit in is their store layouts. All of the stores are
generally laid out the same with garden on one end, lumber on the other end and electrical and
paint in the middle. Training of new associates is also a benefit of chaining. All associates are
trained using the same guidelines. Lastly, no matter where you go the Home Depot commercials
are the same. Obviously they change the language when advertising in foreign countries, but for
the most part they can receive cost savings from running the same ads. These four areas turn out
to be a cost savings to the consumers and the stores.
       Home Depot doesn’t really try to incorporate a main strategy into its daily operations
other than to have the best prices. They treat their employees with respect and their employees in
turn are able to go above and beyond for the customers. Home Depot doesn’t really offer
anything other than its competitors on the outside, but we must remember that it’s what is on the
inside that counts. The home improvement market has become saturated and it is getting harder
to differentiate themselves. Everyone offers the lowest price guaranteed, a store owned credit
card, special deals to contractors, and generally the same products. Home Depot, just like every
other company in the industry, must rely on their service quality.
       Home Depot does have a relation approach with their suppliers. They strive to have long-
term relationships with their suppliers. Once every six months, they bring their main suppliers
into the store and have a miniature convention with the store managers. This allows the managers
to ask questions to the individual vendors and it gives the vendors time to talk about upcoming
products. Department managers at the individual stores have meetings with the individual
vendors on a regular basis. Home Depot spends a lot of time and money pleasing their suppliers.


Ch. 7 Strategy In High Technology Industries
       I can’t really say Home Depot has any technological advances in the production of their
products. Since they are a warehouse store, they rely on their suppliers to get up to speed on new
technology. However, there are some internal workings that rely on the advancement of



                                                 9
technology. A few of the areas we will look at are the inventory ordering system, the check out
stations, and the future of employee training.
       One Home Depot associate is responsible for going around their department and making
sure their inventory system is working correctly and the right pieces of inventory are being
ordered. Every day, along with assisting customers, this employee walks around with a
microcomputer and scans barcodes to see if anything needs to be re-ordered. The orders are
automatically sent to their suppliers who can have the products to the store within the week.
Their direct competitor, Lowe’s, relies on a system that automatically re-orders inventory as the
available stock is lower than a pre-determined number. This is one area that Home Depot could
revamp in order to at least catch up with their competitor and cut back on the very expensive
overhead charges they currently incur because of their outdated inventory system.
       Another area I looked at was the Home Depot’s check out service. They recently updated
the Escondido store with brand new touch screens and customer automated checkouts. This store
was one of the first in Escondido to have the customer self-service check out stands. The new
machines are touch screen and allow for less user errors with their ease of use. They also have
wireless scanners that allow the associate to move around to the customer and scan all of the
products still in the cart. The scanner has a window on the top of it that allows the associate to
see which item was scanned and the price of the item. In this area, Home Depot is doing a great
job in incorporating technology that assists their customers and their employees in a more
enjoyable and easy experience.
       Employee training is also an area that Home Depot excels at. Currently, all of the
cashiers at Home Depot go to a countywide cashier’s college. These cashiers are involved in a
two-week class that starts with the basics of how to work a check out machine. More
importantly, all of the cashiers are taught the same information in all stores. The Home Depot
also uses a store wide training system. This system allows employees to sit at a computer
terminal and receive training guided by a computer. Associates that want to move to another
department or learn more about something within their own department just have to walk back to
this terminal, hit a few buttons, and the training is right there. Another option they have is called
vendor training. Home Depot invites their vendors to hold special classes to teach the associates
about upcoming products and to answer any questions about products currently on the market.
With the vendor training, Home Depot turns around and offers what they call do-it-yourself



                                                 10
workshops. In these workshops, customers like you and I can go in on a weekly basis and learn
about whatever topic they are teaching.
       Home Depot may not directly offer any technological advancement in the production of a
physical product, but they sure have found a variety of ways to show their customers they care.
The quality of their service is paramount and Home Depot is doing what it can to offer
something their competitors are not.


Ch. 9 Corporate Strategy: Horizontal/ Vertical Integration & Strategic Outsourcing
        Home Depot has taken some measures to horizontally integrate through many
acquisitions. I will focus on these acquisitions in my material for chapter 10. In studying Home
Depot and talking with employees, I was unable to come up with any examples of vertical
integration. Home Depot does not plan on coming out with their own line of products and they
are also not planning on building houses any time soon. There are small examples of community
projects where they go out and build houses in a less developed community, but they do not have
any plans to enter the home manufacturing industry.
       The only area I could find that Home Depot outsourced is their deliveries. They use to
employ a set number of employees responsible for making deliveries. Now they have hired a
company to come do this portion of their business for them. Soto, David [Assistant Store
Manager of Hemet Home Depot]. Telephone interview. 17 Nov. 2004.
       Home Depot has entered into many strategic alliances with a variety of companies. Most
of their major vendors have supplied to Home Depot since the beginning of the company. The
relationships they have established with their suppliers have allowed Home Depot to gain a
competitive advantage over their competitors. Lowe’s may be able to copy the relationship
building approach, but Home Depot has a first mover advantage with the suppliers they have
locked in with. Home Depot is also a huge sponsor of the Olympics. This allows Home Depot to
gain benefits from good cause marketing. It also promotes global marketing. Where would Home
Depot be without Tony Stewart? This is a great advertisement pitch for Home Depot. These are
just a few of the credible commitments Home Depot has made over the years to make themselves
different from their closest competitors.




                                                11
Ch. 10 Diversification, Acquisition, and Internal New Ventures
       Over the years, Home Depot has utilized acquisitions in many areas of the business to
better serve their customers. The companies Home Depot acquired offered a specialized product
or service that somehow improved Home Depot’s overall business strategy. Home Depot’s
strategy in business is to offer their customers something more than what their competitors can
offer. Home Depot has acquired many specialized companies over the years for a variety of
reasons.
       One of their acquisitions was with a lighting and fan company known as Hampton Bay.
Home Depot became the main distributor of Hampton Bay’s specialized products with this
acquisition. Emerson Tools used to be the main producer of Craftsman Tools, now Home Depot
has acquired them and they are producing Rigid Tools. Rigid Tools are Home Depot’s main line
of tools now. Your Own Warehouse is a company that is focused on taking direct orders from
customers. They specialize in telephone and Internet orders and promise to have all products to
the customer within two days. Home Depot bought them to utilize their direct network to better
serve their online customers. (“company information” n.d.)
       Since a lot of Home Depot’s business is centered on contractors, they have made a few
acquisitions to assist contractors as well. They acquired Maintenance Warehouse to make the
processing of orders for contractors run smoother. Maintenance Warehouse, now called The
Home Depot Supply, focuses on commercial properties. They specialize in delivering large
amounts of materials directly to job sites so the contractors never have to set foot into a store.
Home Depot has also acquired White Cap. White Cap focuses on selling professional grade tools
specifically designed for construction. This broadens the products that Home Depot offers and
allows them to offers specialized tools to their main group of customers. (“company
information” n.d.)
       Home Depot is using acquisitions to try and stay one step ahead of Lowe’s. The
acquisitions have proven to be successful up until this point in that they offer both sets of
customers something they didn’t have before. As Home Depot continues to control the market,
they will be expected to manage their business portfolio and only make the acquisitions that are
valuable to both the business and the customer.




                                                  12
Ch. 8 Strategy in the Global Environment
         The Home Depot has stores in the U.S., Mexico, Canada, and Puerto Rico so they have to
know how to manage their domestic and global businesses. The theory of location economies is
displayed in Home Depot by their placement of distribution offices. Surprisingly enough, Home
Depot imports the largest number of products from China. So, they have placed one sourcing
outfit in Shanghai and in Shenzen to help with the distribution of their products. They also have
eight distribution centers in the U.S. that receive imports from forty different countries. These
distribution centers allow Home Depot to better distribute to the local stores at a lower cost.
(global presence n.d.)
         Home Depot has taken on a global strategy in their decision to expand. Before they
expand any of their stores in the U.S. or globally, they send an independent team out to survey
the best location for the store. The locations are narrowed down until one place can be decided
on. Home Depot has been successful in Mexico and Puerto Rico by marketing their standardized
products and gaining profits from their experience curve effects. Home Depot can rely on
offering the lowest prices possible which allow them to adapt to almost any market. They also
profit from sending the independent team out to help identify the most profitable location of the
store.
         Home Depot was able to move into Mexico by acquiring Total Home and Del Norte.
Total Home used to be Mexico’s second largest home improvement retailer. Del Norte was a
small home improvement chain. (Degross, 2004, September 17) All of the stores were converted
into Home Depot’s by 2002. Home Depot manages all of its operations in the U.S. and in foreign
countries. They do not franchise, license, establish joint ventures, or run wholly owned
subsidiaries in other countries. Home Depot can utilize their global marketing as a competitive
advantage because no other major home improvement store has opened stores globally.




                                                 13
IRMe
         Innkeepers of America and Home Depot are related in that they have a large focuse on
price. Innkeepers had a problem of competitors offering a better quality product/service to
customers at the same price. Home Depot is doing the same thing with Lowe’s. If you compared
today’s Home Depot stores with the ones from 10 years ago, you will see the insides of the stores
are being re-modeled to look more like Lowe’s. This is exactly what Innkeepers tried to do to
remain competitive. Innkeepers and Home Depot had to find other ways to compete that weren’t
so reliant on pricing.
         Timex and Home Depot differentiate their products. Timex made a watch for just about
every occasion and Home Depot has products for a first time homebuyer out to your everyday
contractor. They also both rely on low costs as a marketing strategy. They also relied on
economies of scale and the experience curve effect to gain a competitive advantage.
         Honda relied on innovation for their competitive advantage. Home Depot relies on
offering a superior service. Honda was good at taking risks to be successful. Home Depot has
relied on a very controlled environment where risks are very well thought out before they are
pursued.
         In the cigarette industry, Phillip Morris and RJ Reynolds battled it out in a similar way as
Home Depot and Lowe’s are now doing. It’s a great example of a tit for tat strategy to see who
can gain the largest market share. Where Home Depot opens a store, Lowe’s soon follows. Home
Depot does have a first mover advantage in the overseas market just like RJ Reynolds had with
China.
         In the cola industry we saw both companies rely on emerging markets to gain market
share. Home Depot has just started to do this in Mexico and has been successful in gaining
market share. Another similarity is in Cokes inability to sell its products outside a certain area, so
they had to increase the density in order to grow. Home Depot acts in a similar way by saturating
the market with stores for the convenience of the customers. This is not the only way Home
Depot can grow, but it is a common way retail stores control the market. Coke went into bottling
to be able to control more of its product offering. Home Depot acquired other companies to be
able to streamline the delivery of products to their customers.
         Coors relied on its ability to produce its own material, which was a competitive
advantage in the beginning. Lowe’s was technically the first large business in the home



                                                  14
improvement industry, but they focused too much on the east coast and allowed Home Depot to
grow at a very rapid rate. Home Depot was able to surpass Lowe’s in market share just as Miller
was able to with Coors.
       Airborne Express and Home Depot rely on their internal strengths to outperform their
competitors. Airborne Express relies on serving one type of customer, which has allowed them to
remain competitive. In such a competitive market, Home Depot must rely on its employees for
their success. External changes or short-term offers will only make the companies look like their
competitors. Internal changes are going to make the difference in the customers experience.
       The best internal link between Home Depot and the cases we covered was with
Southwest Airlines. Both companies rely heavily on the happiness of their employees. It’s
something you can’t really feel unless you work there. It wouldn’t suffice to just say you were
just happy at work. It’s the atmosphere that’s created among all of the employees. There is a
strong family orientation to those that work around you. They both operate on simple
philosophies that seem to be easily imitated, but their competitors just can’t get it right. Without
their employees, both companies would have a hard time competing in the industries they are in.
       I didn’t find a connection between Harley Davidson and Home Depot. Harley is more of
a focused differentiator relying on customer loyalty and the sale of an image. Home Depot is
more of a low cost leader relying more on its internal workings of employees and suppliers to
remain competitive.
       Dell relies on a direct shipping method to continue its success and Home Depot is
heading in this direction. If you look at the acquisitions Home Depot has made all of them have
to do with directly servicing the contractor or everyday customers. The acquisitions have allowed
everyday customers to order items on line. The specialized tool company and the direct delivery
company make it so contractors never have to set foot inside the store. Dell services governments
and businesses in the same way that Home Depot services contractors. Each business has
specialized services set up for these customers that help maintain their profitability.
       Bic was good at the businesses it operated that were within its core competencies. Home
Depot is beginning to open its doors to new products such as home entertainment products. By
offering this line of products, Home Depot is getting away from the products that built the
business. Nobody goes to Home Depot to buy a TV, VCR, or DVD player. Lets just hope it




                                                 15
doesn’t take a Home Depot parfum for them to realize they may be expanding their product line
a bit too far.
        Marks and Spencer Ltd. and Home Depot both invested in a wide product line.
Surprisingly for both companies this turned out to be a competitive advantage. Marks and
Spencer specialized in clothing, then food, and then furniture. Home Depot started with building
supplies, then tools, and now home entertainment items. They are both very similar in their
treatment of employees. Both companies believe in taking care of their employees so their
employees will take care of the customer. Marks and Spencer offered excellent benefit packages
and other benefits. Home Depot has similar strengths in offering of pay and other extra employee
benefits. Both companies treat their suppliers as one of the most important entities to their
business. They look at their suppliers as partners and not just as a company delivering goods.
This is shown by the number of years each of the companies has maintained their suppliers. Both
companies also took on the role of never offering a sale and both companies were and are still
very successful. Both companies spend a lot of time acquiring other companies to add on to their
existing competencies.




                                                 16
Most Interesting Information
       Within the first five years, Home Depot had stores in six states. This is an amazing fact
for such a large store in an overly competitive market to be able to spread themselves out like
this and still be successful. Home Depot is a great success story that had a great start amidst all
of the challenges of the free market system.
       Using the five forces model, the home improvement industry is a tough industry to get
started in. The large retail stores in this industry are making it impossible for the smaller
established home improvement stores to stay in business. You need a large amount of capital,
established suppliers, and a favorable location to be successful.
       Home Depot uses relationship building as their main strategy. They start with employees,
spread to suppliers, and they end up positively affecting the customers. Relationships allow
Home Depot to hold its place as the number one home improvement store within the industry.
       This successful process starts with employees. They are the most important key to Home
Depot’s success. The selection, training, and most of all treatment of their employees are three
areas that Home Depot must stay focused on in order to be successful. A big part of their
competitive advantage has to do with employees LOVE what they do. An employee who cares
about what they do is worth more than 50 associates who are just working for a paycheck.
       Home Depot does more than just operate a business. They try to get community members
into the store with their active workshops. Families can come in to watch their kids build their
first toolbox or grown-ups can join a do-it-yourself class where they will learn all about a
specific project around the house. Either one allows Home Depot to build special relationships
with the most important piece of the business pie, their customers.
       The acquisition of multiple companies is another example of how Home Depot is
building relationships as a part of their strategy. They strive to do something better than what’s
already being done. They offer direct deliveries to contractors and every day customers, special
contractor tools, and custom flooring/lighting these are just a few examples of how Home Depot
has tried to differentiate itself from Lowe’s. These acquisitions have also strengthened the
relationship between the business and their customers. Not to mention, it also allowed Home
Depot to gain access into other countries.




                                                  17
                                        References

Allday E. (2004 November 21). National Fixation- Home Store Wars: Sonoma County Mimics
       U.S Trend With Home Improvement Craze, Fierce Battle Between Small Retailers, Large
       Chain Stores. The Press Democrat, pp E.1.

Degross R. (2004, July 20). Online overhaul a winner; Visitors To Home Depot's Site Now
      Outnumber Rival Lowe's. The Atlanta Journal Constitution, pp 1D.

Degross R. (2004, September 17). Home Depot Makes A Dent In Mexico. Cox News Service,
      Financial section.

Grow, B. (2004, October 25). Thinking Outside The Big Box. Business Week, pp 70.

Home Depot. Company Info. 10 Nov. 2004
     <http://www.homedepot.com/HDUS/EN_US/corporate/corporate.shtml>

Levinson, M. (2004, August 01). Home Improvement. CIO Magazine, Feature section.

Nardelli B., Schlosser J., Sellers, P. (2004, September 20). It’s His Home Depot Now. Fortune
       Magazine, pp115.

No Author. (2004, September 23). The Home Depot to Celebrate 25th Anniversary with 'Week
      of Service'; Home Improvement Retailer to Donate More Than 250,000 Hours of
      Community Service. PR Newswire, Financial News.




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